Fraud is a costly problem for business organizations all over the
world that has proliferated greatly in recent years due to increase in the
use of computers and online e-commerce by businesses. The extent of the
problem is reflected in an alarming estimate by the Association of
Certified Fraud Examiners (ACFE)[1] according to which fraud cost $600
billion (or about $4,500 per employee) to US companies in one year (2001)
alone. (Quoted by Thomas and Gibson, 2003). Fraud[2], in general, refers to
white-collar crimes that illegally deprive individuals or organizations of
money or kind. However, for the purposes of this essay, only the following
three types of fraud shall be dealt with:
The main purpose of this essay is to discuss the options available to
Security Managers while attempting to protect their organizations from the
threat of fraud. However, the essay also explores the major causes of such
frauds and the ways in which they are perpetrated so that solutions for the
problem become self-evident. In addition computer-related fraud and its
prevention is dealt with separately as it poses a unique security hazard
that cannot be prevented by traditional means. The essay will show that,
while it is impossible to totally eliminate theft and fraud in business
organizations, organizational fraud can be kept within limits by adopting
the right security and human resource policies.
Employee Theft and Fraud
The United States Dept. of Commerce estimates that up to 85% of all
organizational theft and fraud is committed by employees from within the
organizations, rather than by outsiders. (Quoted by Bell and Smith,
2000[3]) It has also been estimated that approximately 20% of all
businesses fail[4] because of internal theft and fraud in the workplace and
result in hiking of retail prices by approximately 15% to 30%. (Greengard,
1993: p.81) These f...